As the new year approaches, a CBRE report predicts agility will be key for investors and occupiers in the commercial real estate sector in 2018.
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“We’re now confronting a wider range of possible outcomes for the economy, depending on how various initiatives such as federal policy changes play out,” CBRE Americas Head of Research and Senior Economic Advisor Spencer Levy said in a statement.
Economic growth is expected to persist, but will become more unpredictable as employment gains slow and cap rates flatten. The latter means capital markets investors will want to focus on income gains over property appreciation, CBRE reports.
Continuing a trend from this past year, those in the office market sector will benefit from focusing on suburban submarkets that offer amenity-rich areas that appeal to millennials.
The retail industry is expected to continue shifting as retailers attempt to accommodate the new normal, but this could create opportunities in terms of investment, especially in secondary and suburban markets.
The same e-commerce shift that caused difficulties for the retail industry will continue to drive demand in the industrial and logistics sector. Warehouse and distribution center rents are anticipated to increase, but investor interest will move from larger facilities to smaller, urban-infill warehouses.
Multifamily construction will decline slightly, which should provide some relief to investors.
The hotel industry could see some of the biggest changes as it shifts to accommodate leisure travelers more than business travelers. Providers will need to offer more amenities and flexibility in facilities than ever before in order to stay competitive and retain an edge in a tight labor market.
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